A German court ruled in February that cities can ban the most polluting diesel vehicles from their streets. Many German cities exceed European Union limits on atmospheric nitrogen oxide, known to cause respiratory diseases.

Speaking after talks with business leaders in the Bavarian capital, Munich, Merkel said the court decision was “very balanced”. But diesel technology was still needed while Germany shifts to greener options, she said.

Some officials back a proposal to put blue badges on cleaner diesel vehicles equipped with the latest emissions technology. They could then be used even in cities that have introduced driving bans. But Merkel opposed that scheme.

“Using identifiers nationwide like a blue badge as a first step would ease the pressure to find customized, relevant and specific solutions tailored to the individual city, and that’s what we’re prioritizing,” she said.

The court made clear that uniform nationwide rules on diesel pollution are not necessary.

Municipalities and federal states need to take action, Merkel said, and the national government would also do its part and also make the issue a priority. She suggested retrofitting local public transport.

There has been a global backlash against diesel-engine cars since leading German carmaker Volkswagen (VOWG_p.DE) admitted in 2015 to cheating U.S. exhaust tests. The scandal has spread across the industry and boosted investment in electric vehicles.

“Of course the automobile industry has a duty to make good on what it neglected in terms of software and to meet its commitments because mistakes have been made,” Merkel said.

Reporting by Alexander Huebner, writing by Michelle Martin, editing by Larry King